III. Budget Results - Third Quarter 2013

Approved Budget Modifications

The 2013 Budget Resolution delegated to the Chief Financial Officer (CFO) and selected other officials the authority to make certain modifications to the 2013 Corporate Operating Budget.  The following budget reallocations were approved during the third quarter in accordance with the authority delegated by the Board of Directors.  None of these modifications changed the total 2013 Corporate Operating Budget as approved by the Board in December 2012.

• In August, the CFO approved the reallocation of $133,000 within the Ongoing Operations budget component from the Corporate Unassigned budget to the Salaries and Compensation budget of the Executive Offices to provide funding for expenses associated with the new Chief Information Officer (CIO) position.

• In September, in conjunction with the establishment of the Information Security and Privacy Staff (ISPS) as an independent organizational entity, separate from the Division of Information Technology (DIT), the CFO approved the reallocation of $11,009,229 within the Ongoing Operations and Receivership Funding budget components from the DIT budget to the ISPS budget to support the transfer of information security and privacy functions and staff, including 35 authorized positions, from DIT to ISPS.  This adjustment realigned budget authority within the Salaries and Compensation, Outside Services-Personnel, Travel, Outside Services – Other, and Other Expenses categories in the Ongoing Operations budget and the Salaries and Compensation category in the Receivership Funding budget component.

• In September, the CFO approved the reallocation of $1,517,156 in budget authority within the Ongoing Operations component of the 2013 Corporate Operating Budget from the Office of International Affairs (OIA) budget to the Division of Insurance and Research (DIR) Ongoing Operations budget in conjunction with the integration of OIA functions and staff (including 13 authorized positions) into the DIR.

Following these reallocations, the amounts remaining available within the Corporate Unassigned budgets for the Ongoing Operations and Receivership Funding budget components were $ 25,706,393 and $ 14,343,746, respectively. 

Approved Staffing Modifications

The 2013 Budget Resolution delegated to the CFO the authority to modify approved 2013 staffing authorizations for divisions and offices, as long as those modifications did not increase the total approved 2013 Corporate Operating Budget.  The following staffing adjustments were approved during the third quarter in accordance with the authority delegated by the Board of Directors.  None of these modifications changed the total 2013 Corporate Operating Budget approved by the Board in December 2012.

• In July, the CFO approved a total increase of 21 authorized positions (5 permanent, 16 non-permanent).  Fourteen positions (1 permanent, 13 non-permanent) were added to the Division of Risk Management Supervision’s (RMS) 2013 staffing authorization, including an additional permanent Executive Manager position in the Large Bank Supervision Branch to alleviate supervisory span of control concerns, 3 non-permanent positions to provide administrative support for the Complex Financial Institutions (CFI) Branch, 4 non-permanent research assistant positions to enhance horizontal analysis capabilities in CFI’s Risk Analytics Section, 3 non-permanent policy analysts in the Capital Markets Branch to support current rulemaking workload associated with Basel III and Dodd-Frank Act implementation, 1 non-permanent Supervisory Examination specialist in the Internal Controls and Review Section, 1 non-permanent  Program Analyst to assist the community banking initiative in the Risk Management Policy Branch, and 1 non-permanent Financial Analyst position in the Atlanta Regional Office.  Four permanent positions were added to DOA’s 2013 staffing authorization, three to provide expanded staff support for Corporate Employee Program recruiting and hiring and one to support DOA’s expanded internal and interagency responsibilities for cyber security.  Three non-permanent positions were added to the Division of Depositor and Consumer Protection’s (DCP) 2013 staffing authorizations to support temporary workload associated with the FDIC’s Alliance for Economic Inclusion Initiatives, enhanced data management and reporting for the examination function, and expanded statistical analysis capabilities in the Consumer Research and Examination Analytics Section.

• In August, following the Chairman’s decision to separate the positions of CIO and DIT Director, the CFO approved an increase of one authorized permanent position in the Executive Offices for the new CIO.

• In September, as noted above, the CFO approved the transfer of 35 previously-authorized positions (30 permanent, 5 non-permanent) from DIT to the newly established ISPS.  In addition, following the organizational realignment that merged OIA into DIR, the CFO approved the transfer of 13 previously authorized positions (11 permanent, 2 non-permanent) from OIA to DIR.

• In September, the CFO approved an increase of 5 non-permanent positions in RMS’s 2013 staffing authorization to provide additional resources in the Large Bank Supervision Branch to carry out the FDIC’s expanded responsibilities under the Dodd Frank Act for oversight and resolution planning for more than 100 foreign banking organizations.

Spending Variances

Significant spending variances by major expense category and division/office are discussed below.  Significant spending variances for the nine months ending September 30, 2013, are defined as those that either (1) exceed the YTD budget by $1 million and represent more than two percent of a major expense category or total division/office budget; or (2) are under the YTD budget for a major expense category or division/office by an amount that exceeds $2 million and represents more than four percent of the major expense category or total division/office budget.

Significant Spending Variances by Major Expense Category

Ongoing Operations

There were significant spending variances in six of seven major expense categories in the Ongoing Operations component of the 2013 Corporate Operating Budget through the third quarter.

• Salaries and Compensation ($45 million, or 5 percent, less than budgeted).  The most significant variances in this expense category were in RMS ($14 million), the Legal Division ($8 million), DCP ($5 million), DIT ($4 million), the Division of Resolutions and Receivership (DRR) ($3 million), and DIR ($3 million).  Under spending in this expense category was largely attributable to vacancies in budgeted positions.

• Outside Services – Personnel ($31 million, or 16 percent, less than budgeted).  The CIO Council spent $7 million less than budgeted, largely due to lower-than-planned spending on discretionary systems development projects and the Information Management and Compliance (IMAC) project.  The Division of Administration (DOA) spent $7 million less than budgeted, largely due to lower-than-anticipated contract expenses for services associated with the Student Residence Center, security, and human resources and career counseling; cancellation of pre-retirement seminars due to low enrollment; a decline in administrative support requirements performed by contractors; reduced contractor billings because of delays in completing security clearances prior to bringing replacement contract personnel on board; and significant savings from using FDIC staff rather than contractors to prepare pre-retirement estimates and update the FDIC’s Human Capital Plan.  DRR spent $4 million less than budgeted due to lower than anticipated expenses for business process improvements, IT security, web business support services, and data contracts, and delays in starting work on budgeted advisory services contracts in support of enhanced large bank resolutions procedures.  OCFI spent $3 million less than budgeted due to a project cancellation and the successful renegotiation of an existing contract to provide for lower monthly payment terms.

• Travel expenditures ($12 million, or 16 percent, less than budgeted).  This variance was largely due to vacancies in non-permanent field examination positions in RMS and DCP and vacancies in DCP’s Washington office that led to lower-than-projected regular duty and relocation travel expenses.  Travel expenses were also lower-than-budgeted for Financial Institution Specialists in the Corporate Employee Program (CEP) in the Corporate University (CU).  DRR spending in this expense category was also $1 million lower-than-anticipated for regular duty travel and relocation costs.

• Building expenditures ($7 million, or 10 percent, less than budgeted).  This variance was largely due to delays in the Student Residence Center pipe replacement project, a design change in the Headquarters HVAC replacement project; delays in awarding a contract for the Building Management System (BMS) project in the San Francisco Regional Office, and lower-than-projected utilities consumption.

• Equipment expenditures ($19 million, or 32 percent, less than budgeted).  DIT spent $14 million less than budgeted primarily because of delays in planned purchases of hardware and software, including hardware/software for the technical refresh project.  Those purchases are now expected to occur in the fourth quarter.  In addition, DOA spent $5 million less than budgeted due to intentional deferral of furniture purchases until later in the year and reduced lease costs due to the conversion of a large number of copiers from lease to ownership.

• Other Expenses ($4 million, or 30 percent, less than budgeted).  The variance was mostly due to substantial underutilization of the Professional Learning Accounts by employees and lower-than-projected corporate office supply purchases by DOA.

Receivership Funding

The Receivership Funding component of the 2013 Corporate Operating Budget includes funding for expenses that are incurred in conjunction with institution failures and the management and disposition of the assets and liabilities of the ensuing receiverships, except for salary and benefits and related expenses for permanent employees assigned to the receivership management function.

There were significant spending variances in six of the seven major expense categories through the third quarter in the Receivership Funding component of the 2013 Corporate Operating Budget:

• Salaries and Compensation ($13 million, or 9 percent, less than budgeted). This variance was attributable to vacancies in budgeted non-permanent positions, primarily in the temporary satellite offices.
• Outside Services-Personnel ($130 million, or 30 percent, less than budgeted).  This variance was attributable to less costly resolutions expenses and lower-than-anticipated asset management and marketing costs incurred under contracts for receivership assistance, due diligence, owned real estate (ORE), loan servicing, review of loss share agreements, and securitizations. 
• Travel ($9 million, or 54 percent, less than budgeted).  This variance was attributable to lower-than-budgeted failed bank activity.
• Buildings ($6 million, or 21 percent, less than budgeted).  This variance was attributable to lower-than-budgeted failed bank activity.
• Equipment ($3 million, or 36 percent, less than budgeted). This variance resulted from earlier-than-expected termination of operations at the site of failed banks.  
• Other Expenses ($14 million, or 46 percent, less than budgeted).  This variance also reflected reduced operational costs at failed bank sites due to the earlier-than-anticipated transfer of failed bank operations to the Dallas office and the quicker disposition of failed bank assets.

 Significant Spending Variances by Division/Office¹

Twelve organizations had a significant spending variance through the end of the third quarter:

• DRR ($181 million, or 31 percent, less than budgeted).  Approximately $172 million of this under spending was in the Receivership Funding Budget component due to lower-than-anticipated resolutions and receivership expenses and workload, as explained above.

• DOA ($25 million, or 12 percent, less than budgeted).  This variance was largely attributable to lower-than-anticipated costs in the Outside Services-Personnel, Buildings, and Equipment expense categories, as explained above, and lower-than-expected expenses to support bank closings in the Receivership Funding budget component, due in part to fewer-than-projected bank closings and the smaller average size of bank failures.

• DIT ($23 million, or 12 percent, less than budgeted).   This variance was largely attributable to delays in hardware and software purchases, lower-than-budgeted support costs for failed financial institutions, and vacancies in budgeted positions.

• RMS ($21 million, or 5 percent, less than budgeted).  This variance was largely attributable to vacancies in budgeted non-permanent examination positions and lower-than-budgeted examination travel expenses associated with those vacancies.

• DCP ($8 million or 6 percent less than budgeted).  This variance was primarily attributable to vacancies in budgeted field examination and Washington office positions and lower-than-budgeted spending for regular duty and relocation travel associated with those vacancies.

• CIO Council ($6 million, or 12 percent, less than budgeted).  This variance was largely due to lower-than-planned spending on discretionary systems development projects and the Information Management and Compliance (IMAC) project.

• OCFI ($6 million, or 21 percent, less than budgeted).  This variance was largely attributable to vacancies in budgeted positions and lower-than-budgeted spending for contractual services and relocation travel.

• DIR ($4 million, or 12 percent, less than budgeted).  This variance was primarily attributable to vacancies in budgeted positions due to slower-than-projected hiring to fill those vacancies.

• The Division of Finance ($3 million, or 11 percent, less than budgeted).  This variance was attributable to vacancies in budgeted positions due to slower-than-expected hiring to fill those vacancies.

• CU-CEP ($3 million, or 21 percent, less than budgeted).  This variance was primarily due to lower than budgeted expenses for Salaries and Compensation and Travel for Financial Institution Specialists due to the cancellation of one budgeted class.

• Office of Inspector General ($3 million, or 11 percent, less than budgeted).  This variance was attributable to vacancies in budgeted positions and lower-than-projected travel expenses.

• The combined Executive Support Offices ($4 million, or 16 percent, less than budgeted).  This variance was mostly attributable to lower-than-budgeted spending for contract services by the Office of Corporate Risk Management and the Office of Minority and Women Inclusion and slower-than-projected hiring to fill budgeted positions.

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¹Information on division/office variances reflects variances in both the Ongoing Operations and Receivership Funding components of the 2013 Corporate Operating Budget.